Lee Chan-jin, the head of the Financial Supervisory Service (FSS), marked his first anniversary in office on August 14. The past year has seen the FSS navigate a crisis of organizational separation while expanding its supervisory and investigative functions, focusing on consumer protection and responses to unfair trading practices.
When Lee took office, the FSS was embroiled in internal strife over the establishment of a separate Financial Consumer Protection Agency and its designation as a public institution. After retracting the organizational restructuring plan, the FSS began to strengthen its consumer protection functions internally. In January, it established a consumer protection division directly under the commissioner, linking supervisory and inspection functions with dispute resolution. In March, the FSS launched a Financial Consumer Protection Advisory Committee, which has held three meetings to discuss 32 agenda items.
The focus of consumer protection is shifting from post-incident remedies to proactive prevention. The FSS now requires prior notification to consumers when changing insurance claim review standards and has expanded the application of the proxy claim system for insurance contracts. The agency continues to address large-scale consumer damages, processing 11,696 complaints related to the TMON and WEMAKEPRICE incidents, with refund procedures amounting to 13.22 billion won. In the first half of this year, the number of insurance dispute complaints handled also rose by 24.8% to 14,069 compared to the second half of last year.
In the capital markets, the most significant change occurred in April when the special investigators gained the authority to conduct independent investigations. Previously, they primarily investigated cases referred by the Financial Services Commission and the Securities and Futures Commission. Now, they can initiate investigations into suspected unfair trading practices directly. The FSS has converted two major cases under administrative investigation into compulsory investigations, conducting searches last month. Over the past year, 20 cases of unfair trading in virtual assets have been investigated, with 18 referred to law enforcement agencies. An artificial intelligence monitoring system has also been established to detect illegal financial advertising and new phishing schemes.
As Lee enters his second year, he faces the challenge of translating expanded authority into tangible results. The announcement of governance reform plans for financial holding companies has been delayed multiple times, and given the high interest from the financial sector, the content and implementation of these plans will serve as a litmus test for future supervisory performance.
The FSS is also broadening its inspection and investigation scope. Starting this month, it will examine the sales practices of major banks regarding ETF trusts. From January to May of last year, six major banks sold ETFs worth 64 trillion won, generating 586.4 billion won in commission revenue. Based on the inspection results, the FSS plans to discuss improvements to the commission structure, bank performance evaluations, and sales procedures. It has also indicated plans for a thorough inspection of corporate insurance agencies that repeatedly engage in illegal operations.
Further expansion of investigative authority is also in the works. The FSS is preparing to introduce consumer special investigators aimed at directly investigating illegal private lending and debt collection, with a target implementation date of January next year. If the scope of direct investigations expands to include consumer finance, the FSS's authority and responsibilities will significantly increase.
However, uncertainty surrounding the organization remains a variable. With a second public institution relocation plan expected to be announced as early as this month, the possibility of the FSS relocating to Sejong has been raised. Lee expressed opposition in March, stating, “It is hard to imagine a supervisory body leaving the field.” The FSS, having overcome the initial controversy over the separation of the Financial Consumer Protection Agency, may again face organizational restructuring issues.
If the past year was a time for the FSS to enhance its functions and authority, the coming year is expected to be one where it must demonstrate supervisory results commensurate with its expanded powers.
* This article has been translated by AI.
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